Higher Taxes: The Price of Free Healthcare for India

16 August 2011 - Which Way to Pay

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Higher Taxes: The Price of Free Healthcare for India

The government is considering a proposal to levy a surcharge funding free healthcare for every Indian citizen. Should the ambitious proposal gain wind, you may well see a sharp rise in taxes to fund this liberal healthcare initiative.

An expert panel from the Planning Commission has rejected the pitch to introduce a securities transaction tax in favour of a health surcharge on taxable income. In justification of the selected proposal, the panel said that health surcharge would complement the government’s budgetary allocation. Furthering this, an additional healthcare tax would “obviate the need for user charges on the rich”.

Although a fixed rate has not been set, there is indication that a 1% levy would yield over Rs 9,000 crore for this fiscal. However, the surcharge would undoubtedly be comparable to that levied to fund education, which is expected to generate Rs 27,500 crore this year. Indeed, the education tax amounts to over 40% of the funding available to the human resources development ministry.

According to the Planning Commission panel, the government should introduce a national health entitlement card for each citizen. The card guarantees access across primary, secondary and tertiary healthcare on a fully-funded basis. There are also stirrings that the free national healthcare will cover both in-patient and OPD services. It was, after all, made expressly clear that the panel were against user charges in public hospitals.

In order to bring the aspirational plan into fruition, the Planning Commission’s expert panel has called for a hike in public spending on health from the present 1.4% (or thereabouts) of GDP to at least 2.5%. The rise is part of the 12th Five Year Plan (2012-17) and furthering this, it is proposed that a 3% rise by 2020 will achieve objective healthcare for the masses.

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